MUNIYIELD
CALIFORNIA
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1996
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Fund, Inc.
for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders. Statements and other information
herein are as dated and are subject to change.
<PAGE>
MuniYield
California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the six months ended April 30, 1996, the Common Stock of
MuniYield California Fund, Inc. earned $0.461 per share income
dividends, which included earned and unpaid dividends of $0.077.
This represents a net annualized yield of 6.21%, based on a month-
end net asset value of $14.88 per share. Over the same period, the
total investment return on the Fund's Common Stock was +1.28%, based
on a change in per share net asset value from $15.18 to $14.88, and
assuming reinvestment of $0.459 per share income dividends.
For the six-month period ended April 30, 1996, the Fund's Auction
Market Preferred Stock had an average yield of 3.83% for Series A
and 3.61% for Series B.
<PAGE>
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is likely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
<PAGE>
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
<PAGE>
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
The six-month period ended April 30, 1996 was a volatile one for the
fixed-income markets. Long-term interest rates rose quickly and
dramatically as investors perceived that economic growth was
strengthening, suggesting that the Federal Reserve Board might
initiate a tighter monetary policy. MuniYield California Fund,
Inc.'s net asset value declines were limited because of our
relatively defensive portfolio strategy. We structured the portfolio
with coupons above the industry average that are less sensitive to
market fluctuations and raised cash reserves to approximately 10% of
total assets. We focused on maintaining higher credit quality issues
in the portfolio. Concentrating on assets in the AA-rated and AAA-
rated sectors also helped to limit price declines as the general
level of interest rates rose.
Currently, we are maintaining a cautious investment strategy as we
await greater stability in the economic situation, which would
indicate that interest rates are approaching a peak. At that time,
we intend to recommit the Fund's cash reserves to long-term, higher-
yielding securities to seek to enhance current return. As we reach
interest rate levels that historically have proved attractive to
traditional retail municipal bond investors, we will position the
Fund more aggressively in order to participate in any future price
appreciation as the market recovers.
<PAGE>
In Conclusion
We appreciate your ongoing interest in MuniYield California Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Walter C. O'Connor)
Walter C. O'Connor
Vice President and Portfolio Manager
May 31, 1996
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California Fund, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. However,
these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
<PAGE>
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CP Commercial Paper
GO General Obligation Bonds
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--95.1%
<S> <S> <C> <S> <C>
California Health Facilities Financing Authority Revenue Bonds:
A1+ NR* $ 2,200 (Huntington Memorial Hospital), VRDN, 3.90% due 11/01/2010 (a) $ 2,200
AA Aa3 1,000 (Kaiser Permanente), Series A, 7% due 12/01/2010 1,087
AAA Aaa 2,000 (Kaiser Permanente), Series A, 7% due 10/01/2018 (c) 2,151
A1+ VMIG1++ 1,200 (Pooled Loan Program), VRDN, Series 85-B, 3.75% due 10/01/2010 (a) (d) 1,200
AAA Aaa 1,000 Refunding (Adventist Health Insured), Series A, 6.50% due 3/01/2014 (c) 1,039
A1+ VMIG1++ 4,600 Refunding (Catholic West), VRDN, Series D, 3.65% due 7/01/2018 (a) (c) 4,600
AAA Aaa 4,085 (San Diego Hospital Association), Series A, 6.70% due 10/01/2010 (c) 4,363
NR* A 2,835 (Scripps Research Institute), Series A, 6.625% due 7/01/2018 2,946
A+ A 3,600 (Sutter Health Hospital), Series 89-A, 6.70% due 1/01/2013 3,734
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 2,340 AMT, Series C, 7.45% due 8/01/2011 2,430
AA- Aa 2,585 AMT, Series E-1, 6.70% due 8/01/2025 2,626
AA- Aa 5,000 AMT, Series F-1, 7% due 8/01/2026 5,171
AA- Aa 1,235 Series D, 7.25% due 8/01/2017 1,293
AA- Aa 820 Series F, 7.875% due 8/01/2019 857
AA- Aa 2,900 California HFA, Revenue Bonds, RIB, AMT, 9.237% due 8/01/2023 (h) 2,929
A1+ VMIG1++ 400 California Pollution Control Financing Authority, PCR, Refunding
(Shell Oil Company Project), VRDN, Series C, 3.50% due 11/01/2000 (a) 400
California Pollution Control Financing Authority, Resource Recovery
Revenue Bonds, VRDN, AMT (a):
NR* P1 100 (Delano Project), 4.10% due 8/01/2019 100
NR* NR* 1,000 (Delano Project), 4.10% due 8/01/2019 1,000
NR* P1 1,100 (Delano Project), Series 1991, 4.10% due 8/01/2019 1,100
NR* Aa3 4,800 (Honey Lake Power Project), 4.10% due 9/01/2018 4,800
NR* P1 500 Refunding (Ultra Power Rocklin Project), Series A, 4.15% due 6/01/2017 500
NR* P1 900 Refunding (Ultra Power Rocklin Project), Series B, 4.15% due 6/01/2017 900
<PAGE>
California Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Shell Oil Co.--Martinez Project), VRDN, AMT (a):
A1+ VMIG1++ 400 Series A, 3.80% due 10/01/2024 400
A1+ VMIG1++ 3,800 Series B, 3.80% due 12/01/2024 3,800
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
A1+ VMIG1++ $ 3,107 California State Department of Water Resources Revenue Bonds, CP, 3.15%
due 5/01/1996 $ 3,107
AAA Aaa 2,500 California State, GO, 6% due 8/01/2016 (c) 2,513
California State Public Works Board, Lease Revenue Bonds:
A- A 3,000 (California Community Colleges), Series A, 6.75% due 9/01/2011 3,190
A- A 6,800 (Department of Corrections--Monterey County), Series A, 7% due 11/01/2019 7,401
A- A 5,100 (Various California State University Projects), Series A, 6.625% due 10/01/2010 5,412
A- A 9,800 (Various California State University Projects), Series A, 6.70% due 10/01/2017 10,248
A- A 1,550 (Various Community College Projects), Series B, 7% due 3/01/2014 1,680
A- A 3,535 (Various Community College Projects), Series B, 7% due 3/01/2019 3,832
AA Aa 4,750 California Statewide Community Development Authority Revenue Bonds
(Saint Joseph Health System Group), COP, 6.625% due 7/01/2021 4,940
NR* Aa2 800 California Statewide Community Development Authority, Solid Waste Facility
Revenue Bonds (Chevron USA Inc. Project), VRDN, AMT, 3.80% due 12/15/2024 (a) 800
A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital),
6.60% due 11/01/2012 3,112
BBB NR* 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation
Revenue Refunding Bonds, Series A, 7.10% due 8/01/2022 1,042
AAA Aaa 2,000 Cucamonga County, California, Water District Facilities Refinancing Bonds,
COP, 6.50% due 9/01/2022 (d) 2,082
AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds
(Senior Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 421
East Bay, California, Municipal Utility District, Water System Subordinated
Revenue Refunding Bonds:
AAA Aaa 3,500 6% due 6/01/2012 (c) 3,547
AAA Aaa 4,000 6% due 6/01/2012 (d) 4,053
AAA Aaa 1,000 El Cajon, California, Redevelopment Agency, Tax Allocation Bonds (El Cajon
Redevelopment Project), 6.60% due 10/01/2022 (b) 1,068
<PAGE>
BBB Baa 1,905 Inglewood, California, Public Financing Authority Revenue Bonds
(Manchester-Prairie-North Inglewood Industrial Park Project), Series B,
7% due 5/01/2022 1,970
AA Aa 1,000 Kings River Conservation District, California, Revenue Refunding Bonds
(Pine Flat Power), Series D, 6.375% due 1/01/2012 1,033
AAA Aaa 3,645 Los Angeles, California, Community Redevelopment Agency, Tax Allocation
Refunding Bonds (Bunker Hill), Series H, 6.50% due 12/01/2015 (f) 3,830
AAA Aaa 3,925 Los Angeles, California, Department of Water and Power, Waterworks
Revenue Bonds, 6.30% due 7/01/2024 (c) 4,043
Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B:
AA Aa 3,000 6.625% due 8/01/2019 3,124
AA Aa 2,000 6.625% due 8/01/2025 2,083
Los Angeles, California, Wastewater System Revenue Bonds, Series D:
AAA Aaa 3,000 6.625% due 12/01/2012 (c) 3,179
AAA Aaa 1,545 Refunding, 6% due 11/01/2014 (d) 1,555
AAA Aaa 12,900 Los Angeles County, California, COP (Correctional Facilities Project), 6.50%
due 9/01/2013 (c) 13,511
A1+ VMIG1++ 6,000 Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Refunding Bonds, Proposition C, VRDN, Second Senior
Series A, 3.85% due 7/01/2020 (a)(c) 6,000
Los Angeles County, California, Transportation Commission, Sales Tax
Revenue Bonds, Series A:
AA- Aaa 6,500 6.75% due 7/01/2001 (g) 7,245
AA- A1 2,000 Refunding, 7% due 7/01/2019 2,140
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project):
A A $ 5,000 Series C, 6.875% due 7/01/2019 $ 5,158
AAA Aaa 6,155 Series E, 6.50% due 7/01/2017 (c) 6,423
AA Aa 8,000 Metropolitan Water District, Southern California, Waterworks Revenue
Bonds, 6.625% due 7/01/2001 (g) 8,848
<PAGE>
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue
Bonds, RIB, 9.121% due 9/02/2025 (c)(h) 2,703
AAA Aaa 1,970 Northern California Power Agency, Public Power Revenue Bonds (Hydroelectric
Project Number 1), Series E, 7.15% due 7/01/2024 (c) 2,102
AAA Aaa 6,750 Oakland, California, Joint Powers Financing Authority, Lease Revenue Bonds
(Oakland Administration Building), 5.90% due 8/01/2016 (b) 6,733
AAA Aaa 16,000 Orange County, California, Local Transportation Authority, Sales Tax
Revenue Bonds, Second Series, 6.10% due 2/14/2011 (d) 16,359
A NR* 5,000 Palmdale, California, Civic Authority, Revenue Refunding Bonds (Merged
Redevelopment Project), Series A, 6.60% due 9/01/2034 5,152
AAA Aaa 3,905 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Bonds
(Rancho Redevelopment Project), 6.75% due 9/01/2020 (c) 4,149
NR* A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP
(Eisenhower Memorial Hospital), 7% due 3/01/2022 3,931
Redwood City, California, Public Financing Authority, Local Agency
Revenue Bonds:
AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,363
A- NR* 1,500 Series B, 7.25% due 7/15/2011 1,614
A+ Aaa 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80%
due 11/01/2001 (g) 20,154
Sacramento, California, Municipal Utility District, Electric Revenue Bonds,
Series B (c):
AAA Aaa 3,180 6.25% due 8/15/2011 3,298
AAA Aaa 4,865 6.375% due 8/15/2022 5,037
AAA Aaa 5,000 San Diego, California, Public Facilities Financing Authority, Sewer Revenue
Bonds, 5% due 5/15/2020 (d) 4,391
San Francisco, California, City and County Airport Commission, International
Airport Revenue Bonds, Second Series:
AAA Aaa 1,500 AMT, Issue 5, 6.50% due 5/01/2019 (d) 1,538
AAA Aaa 4,525 AMT, Issue 6, 6.60% due 5/01/2020 (b) 4,672
AAA Aaa 11,000 Refunding, Issue 1, 6.50% due 5/01/2013 (b) 11,683
AA- A1 5,480 San Francisco, California, City and County, GO, UT (Various Purpose Projects),
Series A, 6.50% due 12/15/2010 5,680
AA Aa 5,000 San Francisco, California, City and County Public Utilities Commission,
Water Revenue Bonds, Series A, 6.50% due 11/01/2017 5,171
<PAGE>
AAA Aaa 4,715 San Francisco, California, City and County Redevelopment Agency, Lease
Revenue Bonds (George R. Moscone Convention Center), 6.80% due 7/01/2019 (f) 5,116
AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 3,356
AAA Aaa 9,525 Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A, 6.75% due 11/15/2020 (b) 10,317
AA A1 5,000 Santa Clara County, California, Transportation District, Sales Tax
Revenue Bonds, Series A, 6.75% due 6/01/2011 5,374
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Conservation Redevelopment Project), Series A, 6% due 9/01/2014 (c) 3,017
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
AAA Aaa $ 7,750 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater
Project), Series A, 6.50% due 9/01/2002 (d)(g) $ 8,602
AAA NR* 1,125 Southern California Home Financing Authority, S/F Mortgage Revenue
Bonds, AMT, Series A, 6.75% due 9/01/2022 (e) 1,140
A1+ VMIG1++ 1,500 Southern California Public Power Authority, Revenue Refunding Bonds
(Southern Transmission Project), VRDN, 3.80% due 7/01/2019 (a)(b) 1,500
AAA Aaa 5,000 Stockton, California, Revenue Bonds (Wastewater Treatment Plant Expansion),
COP, Series A, 6.80% due 9/01/2024 (d) 5,400
University of California Revenue Bonds (Multiple Purpose Projects):
A- NR* 3,300 Refunding, Series A, 6.875% due 9/01/2002 (g) 3,734
AAA Aaa 13,560 Series D, 6.375% due 9/01/2019 (c) 14,023
Puerto Rico--3.8%
A1+ P1 3,500 Puerto Rico Commonwealth, CP (Government Development Bank), 4.10%
due 5/03/1996 3,500
<PAGE>
A Baa1 5,500 Puerto Rico Commonwealth, Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series V, 6.625% due 7/01/2012 5,770
A- Baa1 5,000 Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds,
Series U, 6% due 7/01/2014 4,940
Total Investments (Cost--$349,291)--98.9% 365,735
Other Assets Less Liabilities--1.1% 3,927
--------
Net Assets--100.0% $369,662
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1996.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FGIC Insured.
(e)FNMA/GNMA Collateralized.
(f)FSA Insured.
(g)Prerefunded.
(h)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1996.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$349,290,633) (Note 1a) $365,735,327
Cash 65,485
Receivables:
Interest $ 6,162,150
Securities sold 25,000 6,187,150
------------
Deferred organization expenses (Note 1e) 7,672
Prepaid expenses and other assets 14,105
------------
Total assets 372,009,739
------------
<PAGE>
Liabilities: Payables:
Securities purchased 1,558,905
Dividends to shareholders (Note 1f) 555,608
Investment adviser (Note 2) 162,187 2,276,700
------------
Accrued expenses and other liabilities 70,856
------------
Total liabilities 2,347,556
------------
Net Assets: Net assets $369,662,183
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (4,800 shares
of AMPS* issued and outstanding at $25,000 per share
liquidation preference) $120,000,000
Common Stock, par value $.10 per share (16,781,559 shares
issued and outstanding) $ 1,678,156
Paid-in capital in excess of par 233,789,454
Undistributed investment income--net 3,054,667
Accumulated realized capital losses on investments--net
(Note 5) (5,304,788)
Unrealized appreciation on investments--net 16,444,694
------------
Total--Equivalent to $14.88 net asset value per
Common Stock (market price--$14.125) 249,662,183
------------
Total capital $369,662,183
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 10,917,770
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 939,047
Commission fees (Note 4) 144,736
Professional fees 40,612
Accounting services (Note 2) 27,607
Printing and shareholder reports 26,668
Transfer agent fees 24,915
Custodian fees 15,160
Listing fees 12,141
Directors' fees and expenses 11,477
Pricing fees 5,718
Amortization of organization expenses (Note 1e) 2,879
Other 11,569
------------
Total expenses 1,262,529
------------
Investment income--net 9,655,241
------------
Realized & Realized loss on investments--net (1,108,515)
Unrealized Loss on Change in unrealized appreciation on investments--net (3,695,355)
Investments--Net ------------
(Notes 1b, Net Increase in Net Assets Resulting from Operations $ 4,851,371
1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 9,655,241 $ 19,809,357
Realized loss on investments--net (1,108,515) (4,196,257)
Change in unrealized appreciation/depreciation on
investments--net (3,695,355) 29,929,032
------------ ------------
Net increase in net assets resulting from operations 4,851,371 45,542,132
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (7,703,357) (15,159,571)
Shareholders Preferred Stock (2,227,872) (4,189,584)
(Note 1f): Realized gain on investments--net:
Common Stock -- (4,134,976)
Preferred Stock -- (741,300)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (9,931,229) (24,225,431)
------------ ------------
Net Assets: Total increase (decrease) in net assets (5,079,858) 21,316,701
Beginning of period 374,742,041 353,425,340
------------ ------------
End of period* $369,662,183 $374,742,041
============ ============
<FN>
*Undistributed investment income--net $ 3,054,667 $ 3,330,655
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the For the Period
The following per share data and ratios have been derived Six Months Feb. 28,
from information provided in the financial statements. Ended For the 1992++ to
April 30, Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.18 $ 13.91 $ 16.60 $ 14.03 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .57 1.18 1.23 1.22 .77
Realized and unrealized gain (loss) on
investments--net (.28) 1.53 (2.65) 2.62 (.07)
-------- -------- -------- -------- --------
Total from investment operations .29 2.71 (1.42) 3.84 .70
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.46) (.90) (1.00) (.99) (.55)
Realized gain on investments--net -- (.25) (.07) (.08) --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.46) (1.15) (1.07) (1.07) (.55)
-------- -------- -------- -------- --------
Capital charge resulting from issuance
of Common Stock -- -- -- -- (.02)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.13) (.25) (.19) (.18) (.14)
Realized gain on investments--net -- (.04) (.01) (.02) --
Capital charge resulting from issuance of
Preferred Stock -- -- -- -- (.14)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.29) (.20) (.20) (.28)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.88 $ 15.18 $ 13.91 $ 16.60 $ 14.03
======== ======== ======== ======== ========
Market price per share, end of period $ 14.125 $ 13.375 $ 12.125 $ 15.625 $ 14.50
======== ======== ======== ======== ========
<PAGE>
Total Based on market price per share 9.12%+++ 20.62% (16.36%) 15.56% .43%+++
Investment ======== ======== ======== ======== ========
Return:** Based on net asset value per share 1.28%+++ 19.33% (9.69%) 26.88% 2.79%+++
======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .67%* .69% .66% .69% .54%*
Average ======== ======== ======== ======== ========
Net Assets:*** Expenses .67%* .69% .66% .69% .71%*
======== ======== ======== ======== ========
Investment income--net 5.12%* 5.48% 5.44% 5.35% 5.65%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) $249,662 $254,742 $233,425 $278,522 $233,502
======== ======== ======== ======== ========
Preferred Stock outstanding, end
of period (in thousands) $120,000 $120,000 $120,000 $120,000 $120,000
======== ======== ======== ======== ========
Portfolio turnover 36.42% 69.59% 78.89% 21.68% 28.75%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,081 $ 3,123 $ 2,945 $ 3,321 $ 2,946
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 478 $ 882 $ 694 $ 547 $ 449
Per Share ======== ======== ======== ======== ========
On Preferred Series B--Investment income--net $ 450 $ 864 $ 615 $ 688 $ 481
Stock ======== ======== ======== ======== ========
Outstanding:++++++
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on April 10, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split that occurred on December 1, 1994.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund determines and makes available for publication the net
asset value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol MYC.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realized a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $128,214,891 and
$142,852,160, respectively.
Net realized and unrealized gains (losses) as of April 30, 1996 were
as follows:
Realized Unrealized
Losses Gains (Losses)
Long-term investments $ (194,144) $16,444,725
Short-term investments (1,215) (31)
Financial futures contracts (913,156) --
----------- -----------
Total $(1,108,515) $16,444,694
=========== ===========
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $16,444,694, of which $16,613,336 related to
appreciated securities and $168,642 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $349,290,633.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
<PAGE>
Common Stock
For the six months ended April 30, 1996, shares issued and
outstanding remained constant at 16,781,559. At April 30, 1996,
total paid-in capital amounted to $235,467,610.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1996 were:
Series A, 3.39% and Series B, 3.375%.
As of April 30, 1996, there were 4,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1996, MLPF&S, an affiliate of FAM, earned $98,301 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $3,025,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On May 10, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$.077068 per share, payable on May 30, 1996 to shareholders of
record as of May 21, 1996.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MYC
